Global Economic Update: Recession Risk and Inflation Concerns

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The recent banking crises in the US and Switzerland have sparked concerns about the stability of the global financial system. However, these crises are unlikely to pose a broader threat. Despite this, lending standards are anticipated to tighten and inflation rates are expected to remain high. These factors, coupled with a more challenging growth environment, have heightened the risk of a recession.

The Impact of Rising Rates

Investors are growing wary of the effect of rising rates on bank balance sheets and liquidity positions. The potential fallout may slow the Federal Reserve's interest rate hikes and increase the probability of a recession. Meanwhile, despite some signs of relief, inflation rates remain high globally, with wage growth and tight labor markets likely to keep inflation above central banks' targets by year-end.

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